S.E.C. Warns Customers and Financial Advisors Regarding Overstated Credentials


By: John H. Goselin, II

They say everybody does it.  Embellishing your resume to get a job, attract business or get ahead in this highly competitive world.  Well, if you work in the financial services industry and are trying to attract customers to invest their money with you, you better think twice.  The S.E.C. is highlighting their efforts to crack down on overstated credentials and warning potential investors that overstated credentials are a red flag for fraud. 

On June 4, 2015, the S.E.C. issued “Invest Alert: Beware of False or Exaggerated Credentials”.  Although the investment alert is directed at potential investors, it is a shot across the bow for investment advisors, registered representatives, investment advisory firms and broker-dealers generally.   The S.E.C. is cracking down.  They want potential investors to check your credentials and if the potential investors cannot confirm what you claim …. call the S.E.C.  … so they can launch a fraud investigation. 

The S.E.C. Alert highlights five recent proceedings where the S.E.C. has included, within their charges, allegations relating to overstated credentials.   These include:

  • falsely touting that the advisor was a “Top 25 Rising Business Star;”
  • falsely claiming to have graduated from the University of Maryland;
  • falsely holding yourself out as a certified financial planner;
  • over-emphasizing appearances on financial media shows; and
  • using Linked In, Twitter, Facebook and other social media accounts to inaccurately bolster the credentials of the financial advisor.

The cases referenced by the their Alert involved actual fraudulent conduct, but it is probably only a matter of time before the S.E.C. punishes an embellisher despite the complete absence of fraud.   Moreover, there are a host of regulatory actions short of a formal action that the S.E.C. or other regulators can initiate short of a formal action.

Fraud definitely exists; and fraudsters definitely will say anything to further perpetuate their fraudulent activities.  Diligence is important and customers should be cautious.  Thus, honest financial advisors have to be extra careful to only tout credentials that they can document and prove are legitimate.   Unfortunately, this is going to be a case by case exercise and financial advisors will need to closely monitor how the S.E.C. proceeds with its anti-embellishment enforcement actions.

The time, expense and inconvenience of a regulator (or a customer) challenging an embellishment on your resume is simply not worth the risk (or the cost).   So take a look at your resume.  Review your website and your marketing materials.  No more stretching the limits.   It may make the marketing a little harder, but that is much better than the headache of a regulator challenging your resume.